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RIM calendar Q2 results highlights OS dilemma new portfolio helps to restore competitiveness for now
Although RIM’s shipments in calendar 2Q11 were up 11.6% on the same quarter a year ago, the market share and profitability performance since the end of 2010 has clearly been a declining one raising questions in the industry about whether the company is entering a very difficult period. The share price has more than halved in the past 6 months. Revenues were significantly below the growth trend of the past 2 years, and quarterly net income fell to the level of early 2009. On the positive side, RIM continues to strengthen its $2.9bn cash position, adding nearly $200m in the quarter. The company has also just launched a major range of new smartphones and secured ranging with 225 carriers across the world. Although these devices will impact only part of the third calendar quarter, they are likely to improve RIM’s high end performance in Europe and the US, limiting further margin erosion. We believe that some of the enhancements to the OS through Blackberry 7 and also Blackberry messenger will help restore perceptions of product competitiveness. We speculate that there will be further software improvements to the Playbook, although this may not materially affect 3Q11. However, the company still needs a way to unify its software strategy to enable the quality and range of applications to improve, and needs to find a way to attract more top-tier developers. RIM also needs to address time-to-market and the lower price tiers of the fast growing smartphone market.